Mobile Stock Trading Platforms and Individual Investors’ Financial Performance

Abstract

(ProQuest: ... denotes formulae omitted.)1.IntroductionThe psychology of optimism and wishful thinking suggests that most people display unrealistically optimistic views of their abilities and prospects (Weinstein, 1980). Many often believe their perceptions and individual signals instead of public market signals (Buehler et al. 1994) and make decisions based upon how they feel about their competence or expertise levels (Heath & Tversky, 1991). Information Systems (IS) has been the key enabler and a significant catalyst in many business operations. From collecting financial market data to conducting the actual financial transactions, these platforms are an irreplaceable component of any financial trading activity. In the past, the main platform took the form of person-to-person meetings via a broker or through phone calls. Now, the preferred platform is mobile, which offers outstanding accuracy, efficiency, timeliness, and ubiquity. IS have been a catalyst for the startling growth of finance markets over the past few years, particularly the growth in the number of online brokers.Despite the ever-increasing role of IS in finance, no studies have addressed the impact of IS mobile stock trading platforms on individual investors' financial performance. Behavioral finance theories describe individual investors' financial cognition and psychological behavior (Barber & Odean, 2000a) and a variety of explanations for individual investors' financial performance have focused on behavioral biases (Kumar et al., 2011). IS has developed a theory of financial information system issues from the system management perspective (Dass & Pal, 2010). However, no study so far has specifically focused on the relationship between mobile-based stock trading platforms and individual investors' financial performance.Given the critical role of IS in financial markets, the relationship between individual investors' financial performance and mobile stock trading platforms invites tantalizing research inquiries, which led to this study. This study explores the following research questions:1) Which IS constructs should be used to examine the relationship between mobile stock trading platforms and individual investors' financial performance?2) Through what vehicle do IS constructs travel to affect individual investors' trading decisions?3) What is the impact of these constructs on individual investors' financial performance?This research will bridge the gap between the finance and IS literature and encourages more research along this track to broaden the knowledge base and further examine the relationship between mobile stock trading platforms and financial performance, and advance the developments of other enhanced mobile stock trading platforms.2.Literature ReviewCurrently, no research study has examined the relationship between individual investors' financial performance and IS mobile stock trading platforms. Also, no study has considered the effects of mobile stock trading platforms on investors' perceptions, risk-taking behaviors, and performance. Here, we turn to an area that is essential to the study. That is, the vehicle through which IS travel to affect individual investor's trading decisions and ultimately their financial performance. That area is individual investors' perceptions concerning IS mobile stock trading platforms and their predisposed risk-taking behavior.Risk attitude is the set of emotional and psychological attributes of each investor. Two of the widely used tools that are used to determine each risk attitude are the quantitative approach, which uses measures of dispersion, and the psychometric approach, which is concerned with knowledge, attitudes, and personality traits. This study uses the latter approach, based on the work of Cordell (2001; 2002) and Lucarelli & Brighetti (2010), who report that risk categories can be identified by individuals' self-assessment of their risk tolerance. …